SUPERSIZE IT

Lucia Moses

Bigger is better, as a walk through the paper products aisle suggests.

Supermarkets are trading up to club- or large-package sizes in bath tissue and other Center Store categories to serve their convenience-starved customers who are used to making the same purchase at warehouse clubs and supercenters.

"It's critical that you have them available, or you're not an option to shoppers," Leo Braido, sales and marketing director, Riesbeck Food, said of club sizes. "Today's customer expects to go to the grocery store multiple times to buy perishables, but doesn't expect to buy paper towels and tissue. They don't want to buy taxables every trip."

Riesbeck, a 13-store group based in St. Clairsville, Ohio, has club-size paper towels and bath tissue on display and promotion year-round, and is integrating more oversized items in its planograms all the time.

Knowing when and how to stock jumbo packs isn't always easy for retailers, however.

First, shoppers most associate them with the club stores and other big formats that trained them to buy in bulk.

In the early 1990s, traditional supermarkets reacted to club stores' growth by creating dedicated club or big-pack aisles.

Aisles that housed all the big-package sizes in one place certainly presented an image of variety, but they didn't score with shoppers, who had to travel out of their way to find them. Segregating club packs also made it hard to compare their per-unit prices to those of their regular-size counterparts.

Today, the integrated model is the reigning approach, although there are exceptions: SN recently spotted aisles and/or cooler sections dedicated to value packs of paper products, grocery items and frozen foods in Vons, Smith's and Albertsons stores in Las Vegas.

Big packs are standard today in stock-up categories. In Cincinnati where he lives, Todd Hale said that "Kroger has done a pretty good job with bottled water, and paper towels. They're doing more club packs throughout the store." Hale is senior vice president of ACNielsen Consumer Insights and author of an August 2004 report, "The Warehouse Club Consumer."

At El Valu, a two-store operation in the Atlanta area, sales have migrated to those large-package sizes since last summer, when the Hispanic-aimed retailer devoted part of its footprint to them at one of its two stores, co-owner Larry Buckles said.

"Bundle packs are doing exceptionally well, whether it's packs of Bounty or Charmin," he said.

Beyond paper, big-size packages have sold with mixed success, though. "It's new turf for us," Buckles said. "We don't expect every item to be a winner."

SQUEEZE THE CHARMIN

Therein lies the challenge: figuring out which items to stock in big sizes, and how to promote them in the store.

Big-package sizes have shown themselves to sell best in-aisle, said Paul Weitzel, vice president, Willard Bishop Consulting, Barrington, Ill.

To integrate them, though, retailers have to squeeze them in by cutting back facings of existing stockkeeping units and/or eliminating SKUs altogether. If retailers reduce the assortment too much -- and that tipping point varies by category -- they risk hurting their perceived variety. Skimp on space for club packs, however, and it's hard to keep them in stock.

"You may get eight units on the shelf, and eight units go pretty quick," Weitzel said.

El Valu considers factors like price and shopper habit in determining where to place large-pack sizes.

Toilet tissue goes on endcaps, where it gets high visibility. Frito-Lay multipacks go in the snack aisle, though. It's more convenient for the direct-store-delivery man; his presence calls attention to the item; and "it's one of those items people seem to know where to look for," Buckles said.

If El Valu gets an especially good price on an item from its wholesaler, Merchant Distributors, Hickory, N.C., the item will go in the dedicated aisle.

Given that the vast majority of top-spending shoppers are reached by a few hundred items, Hale said, introducing club packs may be a good opportunity to reduce unnecessary SKUs.

Single-store Ted's IGA in Hebron, Conn., has preferred to reduce facings of slow-moving SKUs rather than cut selection and risk losing customers, owner Todge Armata said. Club-sized items present other issues. Bulk products have helped Ted's increase sales and stave off competition, but at the cost of gross profit margins on those bulk items, Armata said.

JOIN THE CLUB

Bishop Consulting predicted that warehouse clubs' impact would moderate because of a slowdown in store openings and membership growth, and increased focus on nonfood and private label. Its outlook called for clubs' share of grocery and consumables to rise to 8% in 2008 from 7.2% in 2004, or one share point.

The club channel still bears watching, suggested research by ACNielsen, Schaumberg, Ill. In 2003, the average household made 11 trips to clubs, up from 10 in 2000 as consumers cut back on their trips to grocery and mass merchant outlets. Supercenters may be opening new stores at a faster rate, but Hale still sees a lot of markets that are understored by the club format.

Heavy grocery shoppers are heavy shoppers of club stores, he said. To the extent that those consumers are likely to be affluent and have big families, clubs may pose a greater threat to supermarkets than supercenters do, he said. Traditional retailers, especially high-end ones, are especially well-positioned to reach club members through big-sized packs, he said.

El Valu plans to seek out more jumbo packs, in paper and elsewhere. "I think this is a dynamic thing," Buckles said. "The last few years have demonstrated [that] Wal-Mart owns the paper aisle. So I would like to see us be able to access more of that. But I'm certain it's not limited to that."

Supermarkets may only be able to go so far in mimicking the club and mass experience, though, because the shopping experiences are fundamentally different. Consumer studies have shown that while people would grab certain items at the warehouse club without hesitation, they would balk at buying the same items during a budgeted supermarket trip, Weitzel said.

"If the price point gets up to a certain size, it's harder to buy a $9 club pack at a supermarkets than a $9 club pack at a club store," he explained. "It's a different shopping trip."

Supermarket Sales of Categories Commonly Sold in Club-Pack Sizes

Sales in billions* (% share)**

Category: 2000; 2001; 2002; 2003; 2004

Toilet tissue: $2.61 (76.5); $2.79 (76.2); $2.76 (76.0); $2.67 (76.5); $2.61 (76.2)

Paper towels: $1.74 (80.2); $1.79 (73.1); $1.74 (78.0); $1.72 (78.5); $1.76 (78.6)

Liq. laundry detergent: $1.71 (73.7); $1.80 (72.9); $1.80 (72.0); $1.83 (72.0); $1.84 (71.9)

Bottled water: $1.90 (88.0); $2.28 (87.4); $2.59 (86.6); $2.86 (86.4); $3.09 (85.6)

Canned vegetables: $3.13 (98.7); $3.22 (98.8); $3.28 (98.5); $3.25 (98.8); $3.15 (98.7)

Source: ACNielsen

*In food stores with annual sales of $2 million or more, excluding supercenters

**Share of sales in food, drug and mass, excluding Wal-Mart Stores